Okwok

Background

Okwok is an undeveloped oil field located in OML 67, 50 km offshore in 132 ft of water and 15 km east of the Oriental operated Ebok development. The field was discovered by the ExxonMobil/NNPC JV in 1967 (Okwok-1), and two subsequent appraisal wells were drilled in 1968 (Okwok-2 and Okwok-3) but not production tested. The wells encountered oil in the LD1 and D2 series of reservoirs (also proved to be oil bearing and under development at the Ebok field) with over 100 ft of oil pay logged in the Okwok-2 well at the D2 level plus multiple 50 ft oil bearing sections in the LD1 in the Okwok-1 and Okwok-2 wells.

In 2001, the ExxonMobil/NNPC JV contributed the Okwok field to Nigeria’s Marginal Field Program, which was established by the Nigerian government to encourage greater indigenous participation in the oil and gas sector. Negotiating rights for the Okwok Field were awarded to Oriental in October 2001 as compensation for Oriental's losses to its OML 115 block resulting from the shift in the international boundary with Equatorial Guinea following the finalization of the maritime boundary treaty between Nigeria and Equatorial Guinea in 2000.

Oriental in June of 2006, with assistance of its technical advisor Sovereign Oil and Gas, completed a farm-in agreement for Okwok with Mobil and the Nigerian National Petroleum Corporation (“NNPC”).  Following final government approval of the Okwok Field farm-out agreement, Addax subsequently entered into a Joint Venture Agreement (“JVA”) with Oriental, acquiring a 40% interest in Okwok and assumed the role of Technical Advisor.

Oriental and Addax commenced a 4 well appraisal drilling program utilizing the High Island IX jack-up drilling rig. The program was successful in testing light crude oil in over-pressured sands within the proven formations discovered by Mobil-NNPC in 1968. In 2007 Oriental and Addax drilled 2 additional wells and commenced a FEED for the phase one development plan for the field. Oriental and Addax reprocessed the 2004 3D seismic with dramatic improvement of reservoir imaging in the field. The parties then conducted a 3 month reinterpretation of the field data set. In August 2009 Oriental extended its partnership with Afren agreeing to their farm-in and to jointly develop the Okwok Field. The Field benefits from the Nigerian Marginal Field Fiscal and Tax Regime.

Oriental announced in November 2010 that the Okwok-9 appraisal well had successfully achieved its objective of confirming the minimum economic field size required for commercial development of the Okwok field. The well was completed over a 35 ft interval of good quality D2 reservoir (average porosity 30%) and flowed 31degree API crude oil at constrained rates intended to ensure integrity of the completion. The well was flowed for 48 hours and shut in for a 54 hour build-up. The final build-up pressure was equal to the initial reservoir pressure, indicating no depletion.

The Company completed an Ocean Bottom Cable 3D seismic survey over the whole Ebok/Okwok/OML 115 area on 4 November 2011. Having commenced the survey on 24 June 2011, the Company acquired 348 km2 of high quality data. Processing of the new data is underway and expected to be complete by the second quarter. One of the primary purposes of the new data is to assist in development planning for the 51.8 mmbbls Okwok field and also optimal placement of one further appraisal well that Oriental-Afren plan to drill during the second half of the year, ahead of formal submission of a Field development Plan (“FDP”) to the Nigerian authorities. The most likely development scenario for Okwok comprises the installation of a separate dedicated production processing platform tied back to and sharing the existing 1.2 mmbbls capacity Ebok Floating Storage Offloading vessel (“FSO”) located approximately 13 km to the west.

Regional understanding and synergies with the Ebok development

The same reservoir intervals that have successfully been appraised and are under development at the Ebok field are continuous and extend through both the Okwok field and OML 115 acreage. The in-depth understanding and experience of the area, gained from detailed work and appraisal drilling undertaken at the Ebok field, provides the basis for the Partnerships’ reserve and resource estimates at Okwok. We estimate:

• That the field has STOIIP of 225 mmbbls in the D2 and LD1C, LD1D and LD1E reservoirs;
• Assuming a 32% recovery factor, 70 mmbbls could be produced; and
• Upside exploration potential at the deeper Qua Iboe level could add significantly to the reserves base. Two prospects have been identified and are estimated to each contain circa 200 mmbbls STOIIP.

The Ebok field offers significant synergies, both from a subsurface understanding and development perspective that will enable the optimal appraisal and development solution for Okwok. There will be scope for cost reductions and savings at both fields through synergies including joint storage and export operations and shared services.

Forward work program

Okwok-9

Okwok-9 appraisal well has successfully achieved its objective of confirming the minimum economic field size required for commercial development of the Okwok field. The well was completed over a 35 ft interval of good quality D2 reservoir (average porosity 30%) and flowed 31o API crude oil at constrained rates intended to ensure integrity of the completion.

The Company expects seismic acquisition to conclude in Q3 2011, and following a period of interpretation and integration with existing data intends to spud an appraisal well in 1H 2012 with formal submission of a Field Development Plan (FDP) anticipated in mid 2012. Given the scale of recoverable resources already proved, it is considered most likely that Okwok will require a stand-alone development solution, but potentially sharing existing storage and offtake facilities that have been installed at the Ebok field.